Forecasting US Equity Market Returns with Machine Learning
Shiller's CAPE ratio is a popular and useful metric for measuring whether stock prices are overvalued or undervalued relative to earnings. Recently, Vanguard analysts Haifeng [...]
Quant Tools for Private Equity and Real Assets
The Covariance Matrix of Real Assets Marielle De JongThe Journal of Portfolio Management, Fall 2018A version of this paper can be found hereWant to read our summaries [...]
DIY Asset Allocation Weights: December 2019
Do-It-Yourself tactical asset allocation weights for the Robust Asset Allocation Index are posted here. (Note: free registration required) Request a free account here if you [...]
DIY Asset Allocation Weights: November 2019
Do-It-Yourself tactical asset allocation weights for the Robust Asset Allocation Index are posted here. (Note: free registration required) Request a free account here if you [...]
A Framework for Creating Model Portfolios
Model Portfolios Basu, Gates, Karir and AngJournal of Wealth Management, Spring 2019A version of the paper can be found here Want to read our summaries [...]
The Perils (and Inevitability) of Forecasting
I recently experienced one of those fortunate confluence of events that helped me better grasp the relationship between forecasting (which I feel is futile) and [...]
Market Sell-off Analysis: Baseline Historical Facts
We often hear that the market is 5% off its highs or that it is down 5% from the high of the year. This alone [...]
Volatility Targeting Improves Risk-Adjusted Returns
There’s a large body of research, including the 2017 study “Tail Risk Mitigation with Managed Volatility Strategies” by Anna Dreyer and Stefan Hubrich, that demonstrates [...]
Buyer Beware: The Reality of Tax-Loss Harvesting Benefits
Executive Summary Tax loss harvesting is widely promoted, but we think the benefits are generally misunderstood and often overstated.[ref]a recent paper highlighted by Wes on [...]
Investment Strategy in an Uncertain World
In 1921, University of Chicago Professor Frank Knight wrote the classic book “Risk, Uncertainty, and Profit.” An article from the Library of Economics and Liberty [...]
Sector Business Cycle Analysis
There are different investment approaches to identify sector winners and losers, such as price momentum strategies, top down approach based on specific macroeconomic indicators or [...]
Using Flexible Spending to Achieve Financial Goals
Financial planning and specifically portfolio "safe" withdrawal rates are often viewed and analyzed from the perspective of rigid rules that can't be broken - i.e., [...]
Rebalancing…Not so Fast
My last article used Warren Buffett’s pre-crisis sale of put options to highlight the risk of getting over our financial skis. In both temperament and [...]
The Smart Money Indicator: A New Risk Management Tool
We have all heard the mantra, “You can’t time the market!” But in reality, investors attempt to do just that every day as part of [...]
Warren Buffett is Wrong About Options (Except)
Warren Buffett sold long-dated, deep out of the money puts in the years leading up to the financial crisis. In his 2008 Annual Letter to [...]
Asset Diversification in a Flat World
Diversification is a fundamental principle of prudent investing due to its ability to mitigate/minimize risks. In fact, it has been called the only free lunch [...]
Investment Factor Timing: Challenging, but Not Impossible
The Promises and Pitfalls of Factor Timing Jennifer Bender, Xiaole Sun, Ric Thomas and Volodymyr Zdorovtsov Journal of Portfolio Management A version of this paper [...]
Summing up the Potential Benefits and Pitfalls of Diversification in 3 Slides
Not long ago I used to teach investment management courses to Master's students (MBAs and MS Finance types). A core aspect of my course was [...]
When Diversification Fails
When Diversification Fails Sebastien Page and Robert PanarielloFinancial Analyst Journal, forthcomingA version of this paper can be found hereWant to read our summaries of academic finance [...]
A Q&A Discussion with Vanguard Researchers on the “Fair Value CAPE Ratio”
As everyone who's been invested for the last ten years knows, post-financial crisis stock returns have been incredible. The chart below highlights the total returns [...]